Correlation Between Iron Road and Stelar Metals
Can any of the company-specific risk be diversified away by investing in both Iron Road and Stelar Metals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Iron Road and Stelar Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road and Stelar Metals, you can compare the effects of market volatilities on Iron Road and Stelar Metals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Iron Road with a short position of Stelar Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Stelar Metals.
Diversification Opportunities for Iron Road and Stelar Metals
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Iron and Stelar is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Stelar Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stelar Metals and Iron Road is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Iron Road are associated (or correlated) with Stelar Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stelar Metals has no effect on the direction of Iron Road i.e., Iron Road and Stelar Metals go up and down completely randomly.
Pair Corralation between Iron Road and Stelar Metals
Assuming the 90 days trading horizon Iron Road is expected to generate 1.15 times more return on investment than Stelar Metals. However, Iron Road is 1.15 times more volatile than Stelar Metals. It trades about -0.09 of its potential returns per unit of risk. Stelar Metals is currently generating about -0.2 per unit of risk. If you would invest 6.50 in Iron Road on August 26, 2024 and sell it today you would lose (0.50) from holding Iron Road or give up 7.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iron Road vs. Stelar Metals
Performance |
| Timeline |
| Iron Road |
| Stelar Metals |
Iron Road and Stelar Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iron Road and Stelar Metals
The main advantage of trading using opposite Iron Road and Stelar Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, Stelar Metals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Stelar Metals will offset losses from the drop in Stelar Metals' long position.| Iron Road vs. Pinnacle Investment Management | Iron Road vs. Magellan Financial Group | Iron Road vs. National Australia Bank | Iron Road vs. Sky Metals |
| Stelar Metals vs. Aurelia Metals | Stelar Metals vs. Thorney Technologies | Stelar Metals vs. Autosports Group | Stelar Metals vs. Ras Technology Holdings |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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